Sale of the century revving up for take off

Birmingham council leader Sir Albert Bore may be forced to mount a controversial sale of the local authority’s vast portfolio of commercial property and other assets in order to avoid cutting front-line public services.

A recent private meeting of Labour councillors saw Sir Albert on the back foot having to respond to councillors who want to raise millions of pounds by disposing of buildings and shareholdings, specifically in Birmingham Airport and the National Exhibition Centre.

He said people were constantly telling him to “wave magic wands” and went on to claim that selling £3.5 billion of council-owned assets would raise “only” £200 million, which wouldn’t be a good deal for Birmingham.

Under existing Government rules, councils selling assets cannot use all of the money to run services. They can only use the interest from investing asset sales money.

If Birmingham sold £3.5 billion worth of property and was able to invest the sum at a six per cent return, the council would gain £210 million a year.

However, one councillor at the meeting said: “In a climate where the leader is talking about the end of local government as we know it and of decommissioning whole tranches of services, there are a lot of people who think that £200 million would come in very handy indeed.

“This is certainly something that is being discussed more and more. People are asking why does the council think it should be running an airport and a conference centre when core services to vulnerable people are in danger of being dismantled?”

The issue, which has been debated many times over the past 10 years, was given a new lease of life by Local Government Secretary Eric Pickles who urged Birmingham to meet a £750 million equal pay bill partly through selling assets.

The council has Government permission to borrow up to £530 million to cover the equal pay compensation bill, leaving £228 million to find.

Mr Pickles has agreed that exceptional circumstances mean that Birmingham could use entire lump sums from asset sales to meet the equal pay bill – a decision that is bound to put more pressure on council leaders to draw up a list of properties and other assets that could easily be sold.

Asked whether Labour would ever consider disposing of Birmingham Airport or the NEC to help meet the equal pay bill, Deputy council leader Ian Ward told Chamberlain Files that “nothing is off the agenda with asset sales as far as the Government is concerned”.

The possibility of asset sales appears to be gaining ground across the political spectrum.

Deputy Tory group leader Robert Alden said most Conservative councillors were now committed to selling at least a share of the council’s holdings in the airport and the NEC as well as a range of buildings which are currently let at “peppercorn rents”.

Cllr Alden added: “It is plain daft to be cutting services for vulnerable people while we hold on to assets that could be sold to raise income.”

He was supported by senior Tory councillor Phil Parkin: “The airport and the NEC are the kind of things we should be looking at. Of course, people will say this is a ridiculous time to sell but you would have to go into it properly looking at all options and you wouldn’t necessarily sell the entire shareholding.

“These are assets that the city built up in a different era for local government. What we need now is cross-party agreement on how we might cash in some of these assets in order to continue providing the council’s core public services.”

Two years ago the council valued its 18.6 per cent shareholding in Birmingham Airport at £67 million. A deal between the airport’s local authority owners – Birmingham and the six other West Midlands district councils – that they will not individually cash in their airport shares expired last year potentially leaving the way open for Birmingham to get rid of its interest in the airport.

Any decision by Sir Albert to dispose of all or part of the NEC could backfire on Birmingham Chamber of Commerce which was persuaded to sell the council its remaining financial interest in the conference venue in 2009, receiving an unspecified lump sum for 5,000 Category A shares.

Although the Chamber retains directors on the board it does not qualify for dividend payments and would gain no financial benefit if the council decided to dispose of NEC shares. The sale was not deemed to be controversial at the time, since it had been assumed that the NEC would never be sold, and was unlikely to return hefty profits while the loans taken out to build the exhibition and conference halls had to be repaid.

The asset sale conundrum has always been difficult ground for Birmingham council leaders.

Tory Mike Whitby found himself criticised in 2010 after appearing to suggest that the NEC and International Convention Centre could be sold to wealthy Arab investors.

He was reportedly talking to the Abu Dhabi government as he tried to forge closer links with oil-rich Middle East investors, and was quoted as saying: “We would allow them to be in partnership with our assets.”

But Cllr Whitby later backtracked, insisting there were no plans to sell assets.